House Passes SEC Disclosure Modernization and Simplification Act of 2014

In what is likely to be a precursor of what can be expected when the 114th Congress convenes in January 2015, with a Republican-controlled House and Senate, the House on December 3 overwhelmingly approved H.R. 4569, entitled “Disclosure Modernization and Simplification Act of 2014”. The bill is now in the hands of the Senate for consideration in Committee.

The bill requires the SEC to both conduct a study of existing SEC disclosure rules, and to propose new disclosure rules within one year of the date of the bill’s enactment. The SEC study and the mandated rules to follow are required to “modernize and simplify such requirements in a manner that reduces the costs and burdens on issuers while still providing all material information.” The scope of the rule revisions would impact both periodic disclosures by reporting companies as well as registration statements for the sale of securities by both reporting and non-reporting companies.

The SEC has studied ways to simplify disclosure for reporting companies a number of times over the past several decades, and some rule changes have been made from time to time. And currently, Keith Higgins, Director of the SEC’s Division of Corporation Finance, has taken on disclosure reform as a priority for the Commission.

Apparently, however, the House is overwhelming of the view that legislation which mandates both study and rule implementation is necessary to make disclosure reform a reality. And history appears to bear out the concerns of these legislators. Back in 2008 the SEC initiated a major initiative to advance disclosure reform for reporting companies and those companies required to furnish registration statements in connection with the sale of their securities. However, this major initiative died a quiet death in 2009, most likely because the SEC’s priorities and resources shifted dramatically in the wake of the 2008 financial markets meltdown and the implementation of the Dodd-Frank Act in 2010.

Undoubtedly this will be one of many bills we can expect to see the light of day in the Senate in 2015, as Congress works through a backlog of bills either voted out of Committee or the House in 2014, and simply languished in the face of a Democratic Senate. With a Republican controlled Senate, look for a slew of new legislation to come up for a vote in the House and Senate in 2015, including legislation aimed at improving and expanding the JOBS Act of 2012. Currently, the SEC has yet to issue final rules on two key sections of the JOBS Act, Title III (investment crowdfunding), and Title IV (Regulation A+).